By Dan Gallagher

Surefire hits are rare in the videogame industry. Even rarer is to have two coming in the same year.

That creates high stakes for the industry this year after a tough 2024. The new Nintendo Switch console and a sequel to the blockbuster "Grand Theft Auto" franchise are both expected to be massive hits when they launch later this year.

But the halo effect for other game makers will be limited. And if either release date slips -- or the products themselves disappoint -- the videogame industry could be in for another growth slump. Total U.S. videogame revenue fell 1% last year to $58.7 billion, according to market-research firm Circana. That follows a gain of only 1% in 2023 -- and a 5% decline the year before that.

Anticipation is still high. The first Nintendo Switch has now sold just over 150 million units to become the company's bestselling console of all time, outselling the Wii by 48%. Nintendo also has gone eight years without a new console, a company record dating at least to the days of its NES system from the mid-1980s.

Take-Two, meanwhile, has gone nearly 12 years since the last GTA game hit the streets. That game has sold more than 210 million units since its 2013 release, which is widely ranked as among the top five selling games of all time.

The console and game are widely regarded as surefire hits in an industry that offers precious few of those. Indeed, even long-established and successful game franchises are no longer immune to costly stumbles.

Electronic Arts warned investors in mid-January of a surprising shortfall in its soccer videogame business now anchored by "EA Sports FC." The franchise once known as "FIFA" has been releasing annual titles since 1993 and is the company's most valuable property. It produces more than half of EA's net bookings each fiscal year, according to Visible Alpha estimates.

EA said in its Feb. 4 earnings call that player engagement is largely back on track. But analysts still expect its overall soccer revenue to fall 6% in the fiscal year ending in March, after at least six straight years of steady gains, according to Visible Alpha data.

"I think FC's misfortunes highlight the challenges in keeping gamers engaged given so many distractions and competition for leisure time," said Colin Sebastian of Baird.

The new Switch console and "Grand Theft Auto VI" will have to contend with the same dynamics. Even if they both manage to live up to sky-high expectations, the crossover effect will be limited.

The unknown release date for GTA 6 complicates planning for publishers of competing action games who want to avoid going directly against such a blockbuster. EA plans to launch its first "Battlefield" sequel since 2021 in the current fiscal year ending in March, but that could shift with GTA's release.

Nintendo is expected to give more details about its own release plans during a virtual event scheduled for April 2. While the launch of a console typically drives sales of new games, the prime beneficiary of Nintendo's new machine will most likely be Nintendo itself.

Other game publishers have long struggled to get traction on the company's platforms. This is because those consoles are generally the only place to play popular Nintendo franchises such as Mario Bros. and Zelda.

Nintendo-owned titles made up 16 of the top 20 selling games for the Switch in the U.S. last year, according to Circana data. Sony, by contrast, owns only four of the top 20 games sold for its PlayStation platform over the same period.

There's also the not-zero risk that the Switch 2 falls flat. Nintendo has been down this road before: Its Wii U console, launched in 2012, badly misfired, selling just 13.6 million units versus 101.6 million sold by the Wii. Its GameCube console in 2001 also undersold its immediate predecessor.

The first Switch console got a notable sales boost from Covid-era lockdowns, which will make comparisons even harder to live up to.

Few, if any, are expecting an outright flop, though.

Nintendo's stock has jumped 34% over the past three months, outperforming all but two S&P 500 stocks in that time. "Very simply, the market is paying more and more attention to the quirky Kyoto company that, in the full light of day, is very clearly one of the great global media brands," Clay Griffin of MoffettNathanson wrote in a Feb. 6 report.

Take-Two, meanwhile, has surged 41% over the past year as its two main rival game publishers, EA and Ubisoft, have notched declines in that time. The new GTA is expected to make the company the largest stand-alone videogame publisher by annual revenue, surpassing EA for the first time ever.

Much remains unknown about the new "Grand Theft Auto," but investors aren't waiting around to rack up their bonus points.

Write to Dan Gallagher at dan.gallagher@wsj.com

(END) Dow Jones Newswires

February 28, 2025 05:30 ET (10:30 GMT)

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